Wednesday, April 16, 2008

Taiwan market commentary I

Give me eight years, I will set the foundation for peace and prosperity for the next century, those were the words of Ma Ying-jeou. He finally won the presidential election, those speculated made a tidy profit, probably Jim Rogers too(if he takes profit). This is it?

How can his victory bring about the structural change and drives even a stronger Taiwanese economy?

Taiwanese economy has been doing fine for the last five years. Economic growths were decent, inflation was tame(though is going up), reserves were strong too, etc. Main exports destinations are China, Hong Kong and the US. It is hard not to feel positive.

Political tensions between China and Taiwan under the previous administration scared many foreigners from pouring money. Taiwan market has been underperformed significantly compared to Hong Kong market even though they have benefited from China robust growth for a while.

The uncertainty overhang is gone now. Ma Ying-jeou pledges to build closer relationships with China. He takes concrete steps. His administration wants to establish direct flights rather than going through roundabout, yes, Hong Kong. He is pushing for more mainland tourists arrival and convertibility between Renminbi and NT dollar.

With closer ties with China and increased domestic spending, I believe this market has legs to run. It is relatively cheap to access to China, trading at 12 times PE. I will continue with part II commentary.

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